Exodus of PRS landlords picks up pace

Exodus of PRS landlords picks up pace

0:03 AM, 16th August 2023, About A year ago 32

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There are signs that a potentially larger-than-anticipated property sell-off among the nation’s landlords is underway, Bloomberg reports.

Using an analysis based on capital gains tax receipts compiled by real estate firm Savills, the figures will prompt concerns about the UK’s rental sector.

The data shows the number of rented homes being sold surged from 22,000 between February and March, to 25,000 between April and May.

Also, HMRC has recently revised upward the disposal figures for the 2021/22 tax year by 8.5% to 153,000 – which may indicate that landlords have been selling up earlier than previously thought.

The consultancy firm TwentyCi has also noted a big decline in rented home availability with numbers hitting a 14-year low in June – which also points to a landlord sell-off.

‘Greater number of buy to let landlords selling up’

Toby Parsloe, a research analyst at real estate firm Savills, told Bloomberg: “The rise in residential disposals in capital gains tax receipts does point to a greater number of buy to let landlords selling up.

“This trend started earlier than previously thought, picking up pace since the market opened again in June 2021 after Covid.”

He added: “For many landlords it simply isn’t worth it anymore, increasing the very real risk that more will be looking to exit the sector.”

While Savills’ forecasts suggest that landlord property sales are indeed rising, the reported disposals are still below the total seen in the two months following last September’s mini-Budget.

Landlords are also navigating a complex terrain

As tenants grapple with a cost-of-living crisis, landlords are also navigating a complex terrain which includes higher interest rates and rising costs.

And as rates rise, landlords with interest-only mortgages are vulnerable with many facing a tough decision – sell up or raise rents to pay the higher costs.

Savills says that since landlords pay CGT on any gains when they sell a property, this is an indicator for BTL sales because a property that isn’t a main residence has CGT due within 60 days.

However, BTL landlords who manage their properties through limited companies are exempt from capital gains tax – which means even more landlords could be selling than official data suggests.

The experts at Savills say the monthly CGT receipt data shows that in the 2022/23 financial year, there were 151,000 home disposals.

That’s the second highest on record, trailing closely behind the preceding tax year with 153,000 disposals.

But Hamptons last week had bad news for landlords selling up – it appears they have missed the top of the market and profits are £10,000 down on this time last year – and 6% of landlords sold at a loss.


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Frank Dane

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16:04 PM, 20th August 2023, About A year ago

I have literally no idea why any landlord would not be selling at the first available opportunity.
Over 10 years I built a portfolio of 7 renovated houses of which I was very proud - for the last 5 years I have been responding to the governments campaign of terror and abuse by evicting my longstanding tenants - thankyou section 21 - and disposing of all my effort. For the last three I’ve made an accelerating rental loss on all remaining properties. Today I am proud to say I have no tenants left and just one house sat on the market which I am literally prepared to give away to get out before their next idiotic idea comes through the pipeline … rent freeze or whatever it is I don’t care any more … get me out of here!!

GlanACC

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17:32 PM, 20th August 2023, About A year ago

Reply to the comment left by Frank Dane at 20/08/2023 - 16:04
I had 18, over the last 5 years I have sold 12 as tenants left. As I am mortgage free and the remaining 6 tenants are long term (including 1 who has been in 20 years) I wont be selling those until they leave. I don't need the income from the properties so I could let them at a rent just enough to cover my costs, at the moment I let at about £50 a month less than the going rate. We shall see what the future brings

Mark Pickersgill

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18:34 PM, 20th August 2023, About A year ago

Reply to the comment left by Frank Dane at 20/08/2023 - 16:04
I'll give you a reason Frank: because I cannot see a better investment for the long term.

As somebody who has never benefited from mortgage interest relief and is not servicing large debt, I would be interested to know what is a better long term (20 year) investment, in terms of gross/net annual returns, capital growth and passivity, than property - can you or someone else please enlighten me? Where are you investing all this capital?

I have 20 tenants and although it is certainly harder now - i.e. less passive - than it was when I started in property about 15 years ago, due exclusively to poorly advised legislation, it is still not really hard work to get double digit returns is it? Unless of course the LL has built the portfolio on a pile of debt during a period of unrealistically low interest rates which were never going to last.

If there is anybody who has a better investment opportunity I would sell but until then I'll have to stick with what I have.

GlanACC

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18:37 PM, 20th August 2023, About A year ago

Reply to the comment left by Mark Pickersgill at 20/08/2023 - 18:34
I sort of asgree with you, if you have no mortgage or low debt PRS is 'still a goer'. The only thing that will kill it is government policies, especially rent caps when labour get in. Capital growth is the thing that props it up. By the way I bought Tesla share in February and they have doubled.

Mark Pickersgill

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18:43 PM, 20th August 2023, About A year ago

Reply to the comment left by GlanACC at 20/08/2023 - 18:37
Ok. Shares are a form of gambling particularly single co. shares but good luck to you my friend, just make sure you quit when you're ahead and don't get too greedy! 🙂

Ps, I drive an I-Pace and EV's are definitely not the long term solution.

GlanACC

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18:51 PM, 20th August 2023, About A year ago

Reply to the comment left by Mark Pickersgill at 20/08/2023 - 18:43
Totally agree, shares are gambling. I have an EV car charging point (which is a selling point for the house and my kids use it). Me, I am strictly diesel or petrol

Trapped Landlord

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19:04 PM, 20th August 2023, About A year ago

Reply to the comment left by GlanACC at 20/08/2023 - 18:37
Agreed, it's a cash buyers game now which is going to make things even worse for any government and tenants. I'm throwing the kitchen sink at getting my portfolio paid off in the next 3 years. I do find myself wondering just what the incoming labour government might come with. Rent controls ? Compulsory purchase orders on anything that's deemed to be unfit for purpose ? Unlimited fines for anyone they deem to be rogue ? Nation wide Selective licensing ?
Meanwhile interest rates are forcing landlords out like never before and net migration is sky high. Its all going to end in tears !

Mark Pickersgill

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19:12 PM, 20th August 2023, About A year ago

Reply to the comment left by Trapped Landlord at 20/08/2023 - 19:04
Absolutely, drive down your debt, look after your properties and your tenants, sit tight and there is an inevitability that the crisis will leave HMG (whatever colour) with no option but to encourage individuals to re-engage with the PRS, even allowing for the big banks entering the market - big banks need big numbers to get them interested - there will be plenty left for us little people🙂

GlanACC

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19:37 PM, 20th August 2023, About A year ago

Reply to the comment left by Mark Pickersgill at 20/08/2023 - 19:12In the current climate i would certainly sell when a property becomes vacant. I can't see the government changing its ways as it is under pressure to get in the changes to S21 and it needs the tax landlords generate. Incorporation is really the only light at the end of the tunnel, but only really worth it for 3+ properties. So, tax tax and more tax .. and regulation is the way forward

Mark Pickersgill

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20:05 PM, 20th August 2023, About A year ago

Reply to the comment left by GlanACC at 20/08/2023 - 19:37
Supply and demand, the more that sell the better it will be for those that remain, sad but true.

I believe it may be a generational thing where, perhaps, the more mature LL's have seen the best years of this industry and us younger ones have to plough new furrows in a different dynamic.

Future Government will have a very stark choice, tax revenues or increased homelessness.

My advice? Don't run for parliament!

Ps, nobody on this site has yet to offer a better investment alternative?

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